KEPCO Naju headquarters building. Provided by KEPCO
In 2014, Korea Electric Power Corporation received a tax refund of 23.9 billion won, which was overpaid at the time of relocation.
According to officials from KEPCO on the 28th, KEPCO received a decision to cancel the tax imposition as a result of a decision regarding the’tax reduction clause due to relocation of the headquarters outside the metropolitan area’ filed with the Tax Tribunal in November of last year.
In accordance with the government policy, KEPCO moved its headquarters from Samseong-dong, Gangnam-gu, Seoul to Naju, Jeollanam-do in 2014. The previous number of employees was around 1,500, the largest among public institutions, and the cost alone was 9.4 billion won as the moving was carried out four times.
The government introduced a tax reduction system to support companies relocating to the headquarters region, and accordingly, KEPCO paid taxes by excluding the income equivalent to the head office personnel from the net income generated in 2016-17.
However, the Internal Revenue Service raised an issue in this area. Gwangju Regional Tax Office announced a tax in September 2019, saying, “When KEPCO calculated the tax reduction or exemption, the number of employees in the previous headquarters was excessively calculated.” The intention was that there was a problem with KEPCO’s information and communication technology (ICT) division and management research institutes including about 300 personnel organized in the headquarters. Additional taxes imposed by the tax authorities amounted to 17 billion won in 2016 and 6.9 billion won in 2017, totaling 23.9 billion won. Accordingly, KEPCO immediately filed a complaint with the Tax Tribunal.
The Tax Tribunal finally decided that the actual work location and work contents were more important than the nominal organization. Since KEPCO’s personnel at special offices included in the head office personnel actually work at the Naju head office, it was not a problem to include them in the head office personnel. With this ruling, KEPCO received 24.6 billion won back by adding interest to the additional tax amount of 23.9 billion won.
This ruling is the result of the first dispute ruling over the’tax reduction clause following the relocation of the headquarters outside the metropolitan area’. As the Tax Tribunal lifted KEPCO’s hand, other companies that moved their headquarters to the provinces, like KEPCO, were able to ease the burden of additional taxation.
Jeonghyun Kim reporter [email protected]
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